China raises rail spending plan again to support economy

Reuters Staff

2 Min Read

Passengers aboard a train look out of windows as it approaches a Beijing station October 10, 2012. REUTERS/David Gray

BEIJING (Reuters) - China has raised its planned railway investment by 20 billion yuan ($3.2 billion) to 630 billion yuan for 2012, the Ministry of Railways said, marking a third such increase this year as part of steps to support the slowing economy.

The revised spending plan would be 3.3 percent higher than an initial 610 billion yuan tally announced last month, according to a bond prospectus published on www.chinabond.com.cn, the government’s bond issuance website.

The increase comes as the government tries to shield the world’s second-largest economy from stiff global headwinds, including fast-tracking some infrastructure projects.

The government has recently approved 25 rail projects that could be worth more than 700 billion yuan, as part of measures to stimulate the country’s slowing economy.

The International Monetary Fund on Tuesday cut its forecast on China’s 2012 economic growth to 7.8 percent from 8 percent and warned of risks to emerging Asia if the euro zone crisis worsens and the United States does not avoid its “fiscal cliff”.

The Ministry of Railways said in September it would boost spending by 30 billion yuan to 610 billion yuan this year while it raised its target to 580 billion yuan by 12.4 percent in July.

The government said on Wednesday it would increase state spending and offer tax breaks to quicken the development of the country’s urban public transport system.

However, China has cut planned railway investment by 500 billion yuan to 2.3 trillion yuan under a five-year plan to 2015, official media reported on Tuesday, but that may reflect spending cuts that have already occurred.

China’s rail investments slowed sharply in 2011 after a fatal high-speed train crash that led to the firing of the minister and some of the ministry’s senior staff.

But the government has been trying to boost investment since then, approving rail projects and giving the green light for the ministry to raise money through corporate bonds.